UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

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

For the transition period from                      to                     

BANCORPSOUTH, INC.

 

(Exact name of registrant as specified in its charter)

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common stock, $2.50 par value Common stock purchase rights Guarantee of 8.15% Preferred Securities of BancorpSouth Capital Trust I		New York Stock Exchange New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Common stock, $2.50 par value
Common stock purchase rights
Guarantee of 8.15% Preferred Securities of BancorpSouth Capital Trust I

(Title of Class)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company o
				(Do not check if a smaller reporting company)

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

     The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on June 30, 2010 was approximately $1,417,000,000, based on the last reported sale price per share of the registrant’s common stock as reported on the New York Stock Exchange on June 30, 2010.

     As of February 14, 2011, the registrant had outstanding 83,481,737 shares of common stock, par value $2.50 per share.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement used in connection with the registrant’s 2011 Annual Meeting of Shareholders, to be held April 27, 2011, are incorporated by reference into Part III of this Report.

 

 

BANCORPSOUTH, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 2010

TABLE OF CONTENTS

PART I
Item 1. Business			3
Item 1A. Risk Factors			11
Item 1B. Unresolved Staff Comments			18
Item 2. Properties			18
Item 3. Legal Proceedings			18
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities			19
Item 6. Selected Financial Data			20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			59
Item 8. Financial Statements and Supplementary Data			62
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			117
Item 9A. Controls and Procedures			117
Item 9B. Other Information			118
PART III
Item 10. Directors, Executive Officers and Corporate Governance			118
Item 11. Executive Compensation			120
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			120
Item 13. Certain Relationships, Related Transactions and Director Independence			120
Item 14. Principal Accountant Fees and Services			120
PART IV
Item 15. Exhibits and Financial Statement Schedules			120
EX-11
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I

ITEM 1. BUSINESS.

GENERAL

          BancorpSouth, Inc. (the “Company”) is a financial holding company incorporated in 1982. Through its principal bank subsidiary, BancorpSouth Bank (the “Bank”), the Company conducts commercial banking and financial services operations in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Florida, Missouri and Illinois. At December 31, 2010, the Company and its subsidiaries had total assets of $13.6 billion and total deposits of $11.5 billion. The Company’s principal office is located at One Mississippi Plaza, 201 South Spring Street, Tupelo, Mississippi 38804 and its telephone number is (662) 680-2000.

          The Company’s Internet website address is www.bancorpsouth.com. The Company makes available its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports free of charge on its website on the Investor Relations webpage under the caption “SEC Filings” as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file or furnish information electronically with the SEC at www.sec.gov. The Company’s Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K (this “Report”).

DESCRIPTION OF BUSINESS

          The Bank has its principal office in Tupelo, Lee County, Mississippi, and conducts a general commercial banking, trust and insurance business through 314 offices in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Florida, Missouri and Illinois. The Bank has grown through the acquisition of other banks and insurance agencies and through the opening of new branches and offices.

          The Bank and its subsidiaries provide a range of financial services to individuals and small-to-medium size businesses. The Bank operates investment services, credit insurance and insurance agency subsidiaries which engage in investment brokerage services and sales of other insurance products. The Bank’s trust department offers a variety of services including personal trust and estate services, certain employee benefit accounts and plans, including individual retirement accounts, and limited corporate trust functions. All of the Company’s assets are located in the United States and all of its revenues generated from external customers originate within the United States.

          The Company has registered the trademarks “BancorpSouth,” both typed form and design, and “Bank of Mississippi,” both typed form and design, with the U.S. Patent and Trademark Office. The trademark “BancorpSouth” will expire in 2024, and “Bank of Mississippi” will expire in 2020, unless the Company extends these trademarks for additional ten year periods. Registrations of trademarks with the U.S. Patent and Trademark Office generally may be renewed and continue indefinitely, provided that the Company continues to use these trademarks and files appropriate maintenance and renewal documentation with the U.S. Patent and Trademark Office at times required by the federal trademark laws and regulations.

COMPETITION

          Vigorous competition exists in all major areas where the Bank is engaged in business. The Bank competes for available loans and depository accounts with state and national commercial banks as well as savings and loan associations, insurance companies, credit unions, money market mutual funds, automobile finance companies and financial services companies. None of these competitors is dominant in the entire area served by the Bank.

          The principal areas of competition in the banking industry center on a financial institution’s ability and willingness to provide credit on a timely and competitively priced basis, to offer a sufficient range of deposit and investment opportunities at competitive prices and maturities, and to offer personal and other services of sufficient quality and at competitive prices. The Company and its subsidiaries believe they can compete effectively in all these areas.

REGULATION AND SUPERVISION

          The following is a brief summary of the regulatory environment in which the Company and its subsidiaries operate and is not designed to be a complete discussion of all statutes and regulations affecting such operations, including those statutes and regulations specifically mentioned herein. Changes in these applicable laws, and their application by regulatory and law enforcement agencies, cannot necessarily be predicted, but could have a material effect on the business and results of the Company and its subsidiaries.

          The Company is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company is required to file annual reports with the Federal Reserve and such other information as the Federal Reserve may require. The Federal Reserve may also conduct examinations of the Company.

          In 2004, pursuant to the Gramm-Leach-Bliley Act of 1999 (“GLBA”), the Company elected to be a financial holding company regulated as such under the Bank Holding Company Act of 1956 (the “Bank Holding Company Act”). Financial holding company powers relate to financial activities that are determined by the Federal Reserve to be financial in nature, incidental to an activity that is financial in nature or complementary to a financial activity (provided that the complementary activity does not pose a safety and soundness risk). GLBA expressly characterizes certain activities as financial in nature, including lending activities, underwriting and selling insurance, providing financial or investment advice, securities underwriting, dealing and making markets in securities and merchant banking. According to Federal Reserve policy and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), a financial holding company must act as a source of financial strength to its subsidiary banks and commit resources to support each such subsidiary. This support may be required at times when a financial holding company may not be able to provide such support.

          The Bank is incorporated under the laws of the State of Mississippi and is subject to the applicable provisions of Mississippi banking laws and the laws of various states in which it operates, as well as federal law. The Bank is subject to the supervision of the Mississippi Department of Banking and Consumer Finance and to regular examinations by that department. Deposits in the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and, therefore, the Bank is subject to the provisions of the Federal Deposit Insurance Act and to examination by the FDIC. FDIC regulations require that management report annually on its responsibility for preparing its institution’s financial statements, and establishing and maintaining an internal control structure and procedures for financial reporting and compliance with designated laws and regulations concerning safety and soundness. The Bank is not a member of the Federal Reserve.

          The Company and the Bank are subject to the provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). Among other things, FDICIA provides a framework for a system of supervisory actions based primarily on the capital levels of financial institutions. FDICIA identifies five capital categories for insured depository institutions (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized”) and requires the respective federal regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements within such categories. Capital is measured in two “Tiers” — Tier I capital consists of common shareholders’ equity and qualifying non-cumulative perpetual preferred stock, less goodwill and certain other intangible assets, and Tier II capital consists of general allowance for losses on loans and leases, “hybrid” debt capital instruments and all or a portion of other subordinated capital debt, depending upon the remaining term to maturity. Total capital is the sum of Tier I and Tier II capital. For an insured financial institution to be classified as “well capitalized,” the Tier I capital, total capital and Tier I leverage capital (Tier I capital divided by total assets, less goodwill) ratios must be at least 6%, 10% and 5%, respectively. The Bank exceeded the criteria for the “well capitalized” category at December 31, 2010. The Company is required to comply with the risk-based capital guidelines established by the Federal Reserve and with other tests relating to capital adequacy that the Federal Reserve adopts from time to time. See Note 21 to the Company’s Consolidated Financial Statements included in this Report for a discussion of the Company’s capital amounts and ratios.

          In September 2010, the oversight body of the Basel Committee announced a package of reforms, commonly referred to as Basel III, that will increase existing capital requirements substantially over the next four years as well as add liquidity requirements for banks. These reforms were endorsed by the G20 at the summit held in Seoul, South Korea in November 2010. The short-term and long-term impact of the new Basel III capital standards and the forthcoming new capital rules to be proposed for non-Basel III United States banks is uncertain.

As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short-term impact of the implementation of Basel III may be or what impact a pending alternative standardized approach to Basel III option for non-Basel III United States banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.

          FDICIA provides for a risk-based deposit insurance premium structure for insured financial institutions. The FDIC generally provides deposit insurance up to $250,000 per customer per institution for depository accounts held at insured financial institutions. Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC and are subject to deposit insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank’s capital level and supervisory rating. As a result of increased bank failures and a decrease in the DIF, in December 2009, the FDIC required all insured financial institutions to prepay three years worth of insurance premiums with the prepayment including a 5% annual growth rate in the projected assessment base and a three basis point increase in the annual assessment rate for 2011 and 2012. The FDIC may require additional special assessment payments if the DIF balance continues to decline.

          The Dodd-Frank Act was signed into law in July 2010, resulting in a major overhaul of the financial institution regulatory system. Among other things, the Dodd-Frank Act established a new, independent Consumer Financial Protection Bureau tasked with protecting consumers from unfair, deceptive and abusive financial products and practices. The Dodd-Frank Act also created the Financial Stability Oversight Council to focus on identifying, monitoring and addressing systemic risks in the financial system. The Financial Stability Oversight Council is tasked with recommending increasingly strict rules for capital, leverage and other requirements based on a company’s size and complexity. The Dodd-Frank Act required the implementation of the “Volcker Rule” for banks and bank holding companies, which prohibits, with certain limited exceptions, proprietary trading and investment in and sponsorship of hedge funds and private equity funds, and generally otherwise limits the relationships with such funds. The Dodd-Frank Act also includes provisions that, among other things, reorganize bank supervision and strengthen the Federal Reserve.

          The Dodd-Frank Act revamped the federal regulatory agencies by eliminating the Office of Thrift Supervision, while keeping the thrift charter, and dividing federal regulatory oversight of thrifts among the Office of the Comptroller of the Currency, the FDIC and the Federal Reserve. The Dodd-Frank Act also eliminated many of the remaining regulations that limited the ability of a bank to open branches in different states. The Dodd-Frank Act included savings associations and industrial loan companies, as well as banks, in the nationwide deposit limitation. Consequently, no acquisition of any financial institution can be approved if the effect of the acquisition would be to increase the acquirer’s nationwide deposits to more than 10% of all deposits. In addition, the Dodd-Frank Act requires fees charged for debit card transactions, commonly referred to as interchange fees, to be both “reasonable and proportional” to the cost incurred by the card issuer.

          Further, the Dodd-Frank Act provided that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or could lead to a material financial loss to such firm. Prior to the implementation of the Dodd-Frank Act, the bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which requires financial institutions to establish metrics for measuring the impact of activities to achieve incentive compensation with the related risk to the financial institution of such behavior. Together, the Dodd-Frank Act and the recent guidance on compensation may impact the current compensation policies at the Company and the Bank.

          The Company is a legal entity that is separate and distinct from its subsidiaries. There are various legal limitations on the extent to which the Bank may extend credit, pay dividends or otherwise supply funds to the Company or its affiliates. In particular, the Bank is subject to certain restrictions imposed by federal law, including without limitation, sections 23A and 23B of the Federal Reserve Act, on any extensions of credit to the Company or, with certain exceptions, other affiliates.

          The primary source of funds for dividends paid to the Company’s shareholders is dividends paid to the Company by the Bank. Various federal and state laws limit the amount of dividends that the Bank may pay to the Company without regulatory approval. Under Mississippi law, the Bank must obtain approval of the Commissioner of the Mississippi Department of Banking and Consumer Finance prior to paying any dividend on the Bank’s common stock. Under FDICIA, the Bank may not pay any dividends if, after paying the dividend, it would be undercapitalized under applicable capital requirements. The FDIC also has the authority to prohibit the Bank from

engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the Bank, could include the payment of dividends.

          In addition, the Federal Reserve has the authority to prohibit the payment of dividends by a bank holding company if its actions constitute unsafe or unsound practices. The Federal Reserve has issued a policy statement, Supervisory Release 09-4 (“SR 09-4”), on the payment of cash dividends by bank holding companies, which outlines the Federal Reserve’s view that a bank holding company that is experiencing earnings weaknesses or other financial pressures should not pay cash dividends that exceed its net income, that are inconsistent with its capital position or that could only be funded in ways that weaken its financial health, such as by borrowing or selling assets. The Federal Reserve has indicated that, in some instances, it may be appropriate for a bank holding company to eliminate its dividends. Further, in the current financial and economic environment, the Federal Reserve has indicated that bank and financial holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

          The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 prohibits a financial holding company, following an interstate acquisition, from controlling more than 10% of the nation’s total amount of bank deposits or 30% of bank deposits in the relevant state. States retain the ability to adopt legislation to effectively raise or lower the 30% limit.

          The Community Reinvestment Act of 1977 (“CRA”) and its implementing regulations provide an incentive for 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 reports under CRA in connection with applications for establishment of domestic branches, acquisitions of banks or mergers involving financial holding companies. An unsatisfactory rating under CRA may serve as a basis to deny an application to acquire or establish a new bank, to establish a new branch or to expand banking services. As of December 31, 2010, the Company had a “satisfactory” rating under CRA.

          The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as extended and revised by the PATRIOT Improvement and Reauthorization Act of 2005 (the “USA Patriot Act”), requires each financial institution (i) to establish an anti-money laundering program; (ii) to establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign financial institutions; and (iii) to avoid establishing, maintaining, administering or managing correspondent accounts in the United States for, or on behalf of, foreign financial institutions that do not have a physical presence in any country. The USA Patriot Act also requires that financial institutions must follow certain minimum standards to verify the identity of customers, both foreign and domestic, when a customer opens an account. In addition, the USA Patriot Act contains a provision encouraging cooperation among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities.

          The activities of the Company and its subsidiaries are also subject to regulation under various federal laws and regulations thereunder, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Electronic Funds Transfer Act, the Currency and Foreign Transactions Reporting Act (Bank Secrecy Act), the National Flood Insurance Act of 1968 and the Real Estate Settlement Procedures Act, among others, as well as various state laws.

          GLBA and other federal and state laws, as well as the various guidelines adopted by the Federal Reserve and the FDIC, provide for minimum standards of privacy to protect the confidentiality of the non-public personal information of customers and to regulate the use of such information by financial institutions. The Company and its subsidiaries have adopted a customer information security program to comply with these regulatory requirements.

          The Bank’s insurance subsidiaries are regulated by the insurance regulatory authorities and applicable laws and regulations of the states in which they operate.

          The Bank’s investment services subsidiary is regulated as a registered investment adviser and broker-dealer by federal and/or state securities regulations and self-regulatory authorities.

          The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) represents a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity or debt securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, the Sarbanes-Oxley Act established: (i) requirements for audit committees, including independence, expertise and responsibilities; (ii) responsibilities regarding financial

statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) standards for auditors and regulation of audits; (iv) disclosure and reporting obligations for the reporting company and its directors and executive officers; and (v) civil and criminal penalties for violation of the securities laws.

          In addition, there have been a number of legislative and regulatory proposals that could have an impact on the operation of financial holding companies and their bank and non-bank subsidiaries. Management is not able to predict whether or in what form these proposals may be adopted in the future and, if adopted, what their effect will be on the Company and its subsidiaries.

LENDING ACTIVITIES

          The Bank’s lending activities include both commercial and consumer loans. Loan originations are derived from a number of sources including direct solicitation by the Bank’s loan officers, existing depositors and borrowers, builders, attorneys, walk-in customers and, in some instances, other lenders, real estate broker referrals and mortgage loan companies. The Bank has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan, and applies these procedures in a disciplined manner.

Commercial Lending

          The Bank offers a variety of commercial loan services including term loans, lines of credit, equipment and receivable financing and agricultural loans. A broad range of short-to-medium term commercial loans, both secured and unsecured, are made available to businesses for working capital (including inventory and receivables), business expansion (including acquisition and development of real estate and improvements), and the purchase of equipment and machinery. The Bank also makes construction loans to real estate developers for the acquisition, development and construction of residential subdivisions.

          Commercial loans are granted based on the borrower’s ability to generate cash flow to support its debt obligations and other cash related expenses. A borrower’s ability to repay commercial loans is substantially dependent on the success of the business itself and on the quality of its management. As a general practice, the Bank takes as collateral a security interest in any available real estate, equipment, inventory, receivables or other personal property, although such loans may also be made infrequently on an unsecured basis. In many instances, the Bank requires personal guarantees of its commercial loans to provide additional credit support.

          The Bank has had very little exposure as an agricultural lender. Crop production loans have been either fully supported by the collateral and financial strength of the borrower, or a 90% loan guaranty has been obtained through the Farm Service Agency on such loans.

Residential Consumer Lending

          A portion of the Bank’s lending activities consists of the origination of fixed and adjustable rate residential mortgage loans secured by owner-occupied property located in the Bank’s primary market areas. Home mortgage lending is unique in that a broad geographic territory may be serviced by originators working from strategically placed offices either within the Bank’s traditional banking facilities or from affordable storefront locations in commercial buildings. In addition, the Bank offers construction loans, second mortgage loans and home equity lines of credit.

          The Bank finances the construction of individual, owner-occupied houses on the basis of written underwriting and construction loan management guidelines. First mortgage construction loans are made to qualified individual borrowers and are generally supported by a take-out commitment from a permanent lender. The Bank makes residential construction loans to individuals who intend to erect owner-occupied housing on a purchased parcel of real estate. The construction phase of these loans has certain risks, including the viability of the contractor, the contractor’s ability to complete the project and changes in interest rates.

          In most cases, the Bank sells its mortgage loans with terms of 15 years or more in the secondary market and either retains or releases the right to service those loans. The sale of mortgage loans to the secondary market allows the Bank to manage the interest rate risks related to such lending operations. Generally, after the sale of a loan with servicing retained, the Bank’s only involvement is to act as a servicing agent. In certain cases, the Bank may be required to repurchase mortgage loans upon which customers have defaulted that were previously sold in the secondary market if these loans did not meet the underwriting standards of the entity that purchased the loans. These loans would be held by the Bank in its mortgage loan portfolio.

          In most cases, the Bank requires fire, extended casualty insurance and, where appropriate, wind and hail insurance and, where required by applicable regulations, flood insurance to be obtained by the borrower. The Bank

maintains its own errors and omissions insurance policy to protect against loss in the event of failure of a mortgagor to pay premiums on fire and other hazard insurance policies. Mortgage loans originated by the Bank customarily include a “due on sale” clause giving the Bank the right to declare a loan immediately due and payable in the event, among other matters, that the borrower sells or otherwise disposes of the real property subject to a mortgage. In general, the Bank enforces “due on sale” clauses. Borrowers are typically permitted to refinance or repay residential mortgage loans at their option without penalty.

Non-Residential Consumer Lending

          Non-residential consumer loans made by the Bank include loans for automobiles, recreation vehicles, boats, personal (secured and unsecured) and deposit account secured loans. Non-residential consumer loans are attractive to the Bank because they typically have a shorter term and carry higher interest rates than those charged on other types of loans.

          The Bank also issues credit cards solicited on the basis of applications received through referrals from the Bank’s branches and other marketing efforts. The Bank generally has a small portfolio of credit card receivables outstanding. Credit card lines are underwritten using conservative credit criteria, including past credit history and debt-to-income ratios, similar to the credit policies applicable to other personal consumer loans.

          The Bank grants consumer loans based on employment and financial information solicited from prospective borrowers as well as credit records collected from various reporting agencies. Financial stability of the borrower and credit history are the primary factors the Bank considers in granting such loans. The availability of collateral is also a factor considered in making such loans. The Bank seeks collateral that can be assigned and has good marketability with an adequate margin of value. The geographic area of the borrower is another consideration, with preference given to borrowers in the Bank’s primary market areas.

OTHER FINANCIAL SERVICES

          The Bank’s insurance service subsidiary serves as an agent in the sale of title insurance, commercial lines of insurance and a full line of property and casualty, life, health and employee benefits products and services and operates in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Missouri and Illinois.

          The Bank’s investment services subsidiary provides brokerage, investment advisory and asset management services and operates in certain communities in Mississippi, Tennessee, Alabama, Arkansas, Louisiana, Texas, Florida and Missouri.

          See Note 22 to the Company’s Consolidated Financial Statements included elsewhere in this Report for financial information about each segment of the Company, as defined by U.S. generally accepted accounting principles (“U.S. GAAP”).

ASSET QUALITY

          Management seeks to maintain a high quality of assets through conservative underwriting and sound lending practices. Management intends to follow this policy even though it may result in foregoing the funding of higher yielding loans. Management believes that the Bank has adequate underwriting and loan administration policies in place and personnel to manage the associated risks prudently.

          In an effort to maintain the quality of the loan portfolio, management seeks to limit higher risk loans. These loans include loans to provide initial equity and working capital to new businesses with no other capital strength, loans secured by unregistered stock, loans for speculative transactions in stock, land or commodity markets, loans to borrowers or the taking of collateral outside the Bank’s primary market areas, loans dependent on secondary liens as primary collateral and non-recourse loans. To the extent risks are identified, additional precautions are taken in order to reduce the Bank’s risk of loss. Commercial loans entail certain additional risks because they usually involve large loan balances to single borrowers or a related group of borrowers, resulting in a more concentrated loan portfolio. Further, because payment of these loans is usually dependent upon the successful operation of the commercial enterprise, the risk of loss with respect to these loans may increase in the event of adverse conditions in the economy.

          The Board of Directors of the Bank focuses much of its efforts and resources, and that of the Bank’s management and lending officials, on loan underwriting and credit quality monitoring policies and practices. Loan status and monitoring is handled through the Bank’s loan administration department. Also, an independent loan review department of the Bank is responsible for reviewing the credit rating and classification of individual credits

and assessing trends in the portfolio, adherence to internal credit policies and procedures and other factors that may affect the overall adequacy of the allowance for credit losses. Weak financial performance is identified and monitored using past due reporting, the internal loan rating system, loan review reports, the various loan committee functions and periodic asset quality rating committee meetings. Senior loan officers have established a review process with the objective of quickly identifying, evaluating and initiating necessary corrective action for problem loans. The results of loan reviews are reported to the Audit Committee of both the Company’s and the Bank’s Board of Directors. This process is an integral element of the Bank’s loan program. Nonetheless, management maintains a cautious outlook in anticipating the potential effects of uncertain economic conditions (both locally and nationally) and the possibility of more stringent regulatory standards.

RECENT ACQUISITIONS

          The Company completed no acquisitions during 2010.

EMPLOYEES

          At December 31, 2010, the Company and its subsidiaries had approximately 4,311 full-time equivalent employees. The Company and its subsidiaries are not a party to any collective bargaining agreements and employee relations are considered to be good.

EXECUTIVE OFFICERS OF THE REGISTRANT

          Information follows concerning the executive officers of the Company who are subject to the reporting requirements of Section 16 of the Exchange Act:

Name		Offices Held		Age
Aubrey B. Patterson		Chairman of the Board of Directors and Chief Executive Officer of the Company and the Bank; Director of the Company			68
James V. Kelley		President and Chief Operating Officer of the Company and the Bank; Director of the Company			61
William L. Prater		Treasurer and Chief Financial Officer of the Company; Executive Vice President, Chief Financial Officer and Cashier of the Bank			50
Larry Bateman		Executive Vice President of the Company and Vice Chairman of the Bank			61
W. James Threadgill, Jr.		Executive Vice President of the Company and Vice Chairman of the Bank			56
Gordon Lewis		Executive Vice President of the Company and Vice Chairman of the Bank			61

Name		Offices Held		Age
Gregg Cowsert		Executive Vice President of the Company and Vice Chairman and Chief Lending Officer of the Bank			63
Cathy S. Freeman		Executive Vice President and Corporate Secretary of the Company and the Bank			45
Gary C. Bonds		Senior Vice President and Principal Accounting Officer of the Company and Executive Vice President and Controller of the Bank			63
Carol Waddle		Senior Vice President of the Company and Senior Vice President, Audit and Loan Review of the Bank			49

          None of the executive officers of the Company are related by blood, marriage or adoption to each other or to any of the Company’s directors or nominees up for election at the 2011 annual meeting of shareholders. There are no arrangements or understandings between any of the executive officers and any other person pursuant to which the individual named above was or is to be selected as an officer. The executive officers of the Company are elected by the Board of Directors at its first meeting following the annual meeting of shareholders, and they hold office until the next annual meeting or until their successors are duly elected and qualified.

          Mr. Patterson has served as Chairman of the Board and Chief Executive Officer of the Bank and the Company for at least the past five years.

          Mr. Kelley has served as President and Chief Operating Officer of the Bank and the Company for at least the past five years.

          Mr. Prater joined the Company on September 1, 2008 and served as Executive Vice President until June 30, 2009 when he was named Treasurer and Chief Financial Officer of the Company and Executive Vice President, Chief Financial Officer and Cashier of the Bank. Prior to joining the Company, Mr. Prater most recently served as Executive Vice President of Finance at Regions Bank and held the office of Senior Vice President of Finance at AmSouth Bank from 2004 to 2006.

          Mr. Bateman has served as Executive Vice President of the Company for at least the past five years. He has served as Vice Chairman of the Bank during this same period.

          Mr. Threadgill has served as Executive Vice President of the Company and Vice Chairman of the Bank for at least the past five years.

          Mr. Lewis had served as Louisiana/Texas Region President of BancorpSouth Bank for at least two years prior to December 2007 when he was named Executive Vice President of the Company and Vice Chairman of the Bank.

          Mr. Cowsert has served as Executive Vice President of the Company and Vice Chairman and Chief Lending Officer of the Bank for at least the past five years.

          Mrs. Freeman has served as First Vice President and Corporate Secretary of the Company and the Bank or Senior Vice President and Corporate Secretary of the Company and the Bank for at least the two years prior to January 2008 when she was named Executive Vice President of the Company and the Bank.

          Mr. Bonds has served as Senior Vice President of the Company and Senior Vice President and Controller of the Bank for at least the three years prior to September 2008, when he was named Executive Vice President and Controller of the Bank, and the three years prior to December 2008, when he was named Senior Vice President and Principal Accounting Officer of the Company.

          Ms. Waddle joined the Company on March 20, 2006 and served as Senior Vice President and General Auditor of the Company until January 27, 2010, when she was named Senior Vice President of the Company and Senior Vice President, Audit and Loan Review of the Bank. Prior to joining the Company, Ms. Waddle was a partner with T. E. Lott & Company.

ITEM 1A. RISK FACTORS.

          Certain statements contained in this Annual Report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “believe,” “estimate,” “expect,” “plan,” “predict,” “foresee,” “may,” “might,” “will,” “would,” “should,” “could” or “intend,” future or conditional verb tenses, and variations or negatives of such terms. These forward-looking statements include, without limitation, those relating to the expiration of the Company’s trademarks, the Company’s ability to compete effectively, the effect of changes in laws, governmental regulations and legislative proposals affecting financial institutions, examinations of the Company by the Federal Reserve, the Company’s operating results, interest earning assets and interest bearing liabilities, commercial loans, mortgage loans, economic conditions in the Company’s market area and the impact of the economic downturn on the Company’s financial condition, internal control over financial reporting, the Company’s remediation efforts with respect to the material weakness in internal control over financial reporting, maturities and fair values of held-to-maturity and available-for-sale securities, valuation of mortgage servicing rights, diversification of revenue stream, the Company’s policy regarding underwriting and lending practices, other real estate owned, asset quality, net interest revenue, net interest margin, interest rate sensitivity, credit quality and credit losses, determination of collateral fair value, analysis of guarantors, compliance with underwriting and/or appraisal standards, losses from representation and warranty obligations, the Company’s foreclosure process, inspection of projects corresponding to construction, acquisition and development loans, renewal of construction, acquisition and development loans, deferred tax assets, unrecognized tax benefits, capital resources, uses of capital, sources of liquidity and liquidity strategies, sources of maturing loans and investment securities, sales of loans held for sale, cash from operating activities, deposits, non-performing assets (“NPAs”), the ability to declare and pay dividends, future acquisitions, market risk, critical and significant accounting policies, the impact of recent accounting pronouncements, estimated amortization expense of amortizable identifiable intangible assets, market conditions, stock repurchase program, allowance for credit losses, vesting of restricted stock and performance shares, valuation of stock options, fair value of loans and leases, values of investment securities, contributions to pension plans, goodwill, related party transactions, loan concentrations, impaired loans, non-performing loans, non-accrual loans and leases, allowance for loan losses, economic value of equity, the ratio of tangible equity to tangible assets, other-than-temporary impairment of securities, financial condition of the Company’s borrowers, off-balance sheet commitments and arrangements, future lease payments, pension and other post-retirement benefit amounts, charge-offs, legal and regulatory limitations and compliance, amendments to the Company’s code of business conduct and ethics or waiver of a provision thereof, junior subordinated debt securities and the effect of certain legal claims and pending lawsuits.

     We caution you not to place undue reliance on the forward-looking statements contained in this Report in that actual results could differ materially from those indicated in such forward-looking statements due to a variety of factors. These factors include, but are not limited to, the following:

	•		Local, regional and national economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact;
	•		The ability of the Company to increase noninterest revenue and expand noninterest revenue business;
	•		Changes in general business or economic conditions or government fiscal and monetary policies;
	•		Fluctuations in prevailing interest rates and the effectiveness of the Company’s interest rate hedging strategies;
	•		The ability of the Company to maintain credit quality;
	•		The ability of the Company to provide and market competitive products and services;
	•		Changes in the Company’s operating or expansion strategy;
	•		Geographic concentration of the Company’s assets and susceptibility to economic downturns in that area;
	•		The availability of and costs associated with maintaining and/or obtaining adequate and timely sources of liquidity;
	•		Volatility and disruption in national and international financial markets;
	•		Government intervention in the U.S. financial system;
	•		Laws and regulations affecting financial institutions in general;
	•		The ability of the Company to operate and integrate new technology;

	•		The ability of the Company to manage its growth and effectively serve an expanding customer and market base;
	•		The ability of the Company to attract, train and retain qualified personnel;
	•		Changes in consumer preferences;
	•		The ability of the Company to collect amounts due under loan agreements and to attract deposits;
	•		Legislation and court decisions related to the amount of damages recoverable in legal proceedings;
	•		Possible adverse rulings, judgments, settlements and other outcomes of pending litigation; and
	•		Other factors generally understood to affect the financial results of financial services companies.

     The Company undertakes no obligation to update its forward-looking statements to reflect events or circumstances that occur after the date of this Report.

     In addition to the factors listed above that could influence our forward-looking statements, management believes that the risk factors set forth below should be considered in evaluating the Company’s business. Other relevant risk factors are outlined below and may be supplemented from time to time in the Company’s filings with the Securities and Exchange Commission.

Our business may be adversely affected by conditions in the financial markets and economic conditions generally.

          Since mid-2007 the financial services industry and the securities markets generally have been materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. The global markets have been characterized by substantially increased volatility and short-selling and an overall loss of investor confidence. Market conditions have led to the failure or merger of a number of prominent financial institutions. Financial institution failures or near-failures have resulted in further losses as a consequence of defaults on securities issued by them and defaults under contracts entered into with such entities as counterparties. Furthermore, declining asset values, defaults on mortgages and consumer loans, and the lack of market and investor confidence, as well as other factors, have all combined to increase credit default swap spreads and to cause rating agencies to lower credit ratings. Despite recent stabilization in asset prices, economic performance and significant declines in Federal Reserve borrowing rates, there remains a risk of continued asset and economic deterioration, which may increase the cost and decrease the availability of liquidity. Additionally, some banks and other lenders have suffered significant losses and they have become reluctant to lend, even on a secured basis, because of capital limitations, potentially increased risks of default and the impact of declining asset values on collateral. The foregoing has significantly weakened the strength and liquidity of some financial institutions worldwide.

          Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, is highly dependent upon the business environment in the markets where we operate and in the United States as a whole. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, natural disasters or a combination of these or other factors.

          Overall, the 2010 business environment continued to be adverse for many households and businesses in the United States. While the business environment in the markets in which we operate has been less adverse than in the broader United States, it has deteriorated nonetheless. It is possible that the business environment in the United States will continue to deteriorate for the foreseeable future. There can be no assurance that these conditions will improve in the near term. Such conditions could adversely affect the credit quality of our loans, our results of operations and our financial condition.

We may be adversely affected by the soundness of other financial institutions.

          Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral we hold cannot be realized

upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure owed to us. Any such losses could have a material adverse affect on our financial condition and results of operations.

We may elect or be compelled to seek additional capital in the future, but that capital may not be available on favorable terms when it is needed.

          We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. In addition, we may elect to raise additional capital to support our business or to finance any acquisitions or we may otherwise elect or be required to raise additional capital. In that regard, a number of financial institutions have recently raised considerable amounts of capital, which could adversely impact our ability to access the capital markets on favorable terms.

          Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot provide assurance of our ability to raise additional capital if needed or to be able to do so on terms acceptable to us. If we cannot raise additional capital on favorable terms when needed, it may have a material adverse effect on our financial condition and results of operations.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

          Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or the terms of which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. A decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated could detrimentally impact our access to liquidity sources. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.

We make and hold in our portfolio a significant number of real estate construction, acquisition and development loans, which are based upon estimates of costs and values associated with the completed project and which pose more credit risk than other types of loans typically made by financial institutions.

          At December 31, 2010, we had a balance of $1.1 billion in real estate construction, acquisition and development loans, representing 12.3% of our total loan portfolio. These real estate construction, acquisition and development loans have certain risks that are not present in other types of loans. The primary credit risks associated with real estate construction, acquisition and development loans are underwriting, project risks and market risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk and environmental and other hazard risks. Market risks are risks associated with the sale of the completed residential and commercial units. They include affordability risk, which means the risk that borrowers cannot obtain affordable financing, product design risk, and risks posed by competing projects. Real estate construction, acquisition and development loans also involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, real estate construction, acquisition and development loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project. If we are forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance and accrued interest on the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it. The adverse effects of the foregoing matters upon our real estate construction, acquisition and development portfolio could necessitate a further increase in non-performing loans related to this portfolio and these non-performing loans may result in a material level of charge-offs, which may have a material adverse effect on our financial condition and results of operations.

          Due to the downturn in the housing market, demand for construction, acquisition and development loans has been declining, a trend that management expects to continue. The decline in this portfolio presents an additional challenge to maintaining and growing our earning assets.

Our allowance for credit losses may not be adequate to cover actual credit losses.

          We make various assumptions and judgments about the collectability of our loan and lease portfolio and provide an allowance for potential losses based on a number of factors. The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses. In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management. Any increases in the allowance for credit losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Provisions for Credit Losses and Allowance for Credit Losses” included herein for more information regarding our process for determining the appropriate level of the allowance for credit losses.

Our operations are subject to extensive governmental regulation and supervision.

          The Company has elected to be a financial holding company pursuant to GLBA and the Bank Holding Company Act and the Bank is a Mississippi state banking corporation. Both are subject to extensive governmental regulation, supervision, legislation and control. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not security holders. These laws and regulations limit the manner in which we operate, including the amount of loans we can originate, interest we can charge on loans and fees we can charge for certain services. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Most recently, the Dodd-Frank Act was enacted, implementing sweeping reforms to the financial services industry. A number of provisions of the Dodd-Frank Act remain to be implemented through the rulemaking process at various regulatory agencies. We are unable to predict what the final form of these rules will be when implemented by the respective agencies, but management believes that certain aspects of the new legislation, including without limitations, the additional cost of higher deposit insurance and the costs of compliance with disclosure and reporting requirements and examinations by the new Consumer Financial Protection Bureau, could have a significant impact on our business, financial condition and results of operations.

          It is possible that there will be continued changes to the banking and financial institutions regulatory regimes in the future. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. We cannot predict the extent to which the government and governmental organizations may change any of these laws or controls. We also cannot predict how such changes would adversely affect our business and prospects.

Because of the geographic concentration of our assets, our business is highly susceptible to local economic conditions.

          Our business is primarily concentrated in selected markets in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Florida, Missouri and Illinois. As a result of this geographic concentration, our financial condition and results of operations depend largely upon economic conditions in these market areas. Deterioration in economic conditions in the markets we serve could result in one or more of the following: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decrease in the demand for our products and services; and a decrease in the value of collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage.

We obtain a significant portion of our noninterest revenue through service charges on core deposit accounts, and recent legislation and regulations impacting service charges could reduce our fee income.

          A significant portion of our noninterest revenue is derived from service charge income. The largest component of this service charge income is overdraft-related fees. Changes in banking regulations, and in particular the Federal Reserve’s recently adopted rules pertaining to certain overdraft payments on consumer accounts and the FDIC’s Overdraft Payment Programs and Consumer Protection Final Overdraft Payment Supervisory Guidance, will have a significant adverse impact on our service charge income and overall results. Additionally, changes in customer behavior as well as increased competition from other financial institutions will result in declines in deposit accounts or in overdraft frequency resulting in a decline in service charge income. A reduction in deposit account fee income could have a material adverse effect on our earnings.

Changes in interest rates could have an adverse impact on our results of operations and financial condition.

          Our earnings and financial condition are dependent to a large degree upon net interest income, which is the difference or spread between interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities may fluctuate. This can cause decreases in our spread and can adversely affect our earnings and financial condition.

          Interest rates are highly sensitive to many factors including:

	•		The rate of inflation;
	•		Economic conditions;
	•		Federal monetary policies; and
	•		Stability of domestic and foreign markets.

          The Bank originates residential mortgage loans for sale and for our portfolio. The origination of residential mortgage loans is highly dependent on the local real estate market and the level of interest rates. Increasing interest rates tend to reduce the origination of loans for sale and fee income, which we report as gain on sale of loans. Decreasing interest rates generally result in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their debt in order to reduce their borrowing cost. This typically leads to reinvestment at lower rates than the loans or securities were paying. Changes in market interest rates could also reduce the value of our financial assets. Our financial condition and results of operations could be adversely affected if we are unsuccessful in managing the effects of changes in interest rates.

Monetary policies and economic factors may limit our ability to attract deposits or make loans.

          The monetary policies of federal regulatory authorities, particularly the Federal Reserve, and economic conditions in our service area and the United States generally, affect our ability to attract deposits and extend loans. We cannot predict either the nature and timing of any changes in these monetary policies and economic conditions, including the Federal Reserve’s interest rate policies, or their impact on our financial performance. The banking business is subject to various material business risks, which have become more acute during the current environment of economic slowdown and recession. In the current economic environment, foreclosures have increased and such conditions could also lead to a potential decline in deposits and demand for loans.

Volatility in capital and credit markets could adversely affect our business.

          The capital and credit markets have been experiencing volatility and disruption for several years. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. If market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

Hurricanes or other adverse weather events could negatively affect local economies where we maintain branch offices or cause disruption or damage to our branch office locations, which could have an adverse effect on our business or results of operations.

     We have operations in Mississippi, Alabama, Louisiana, Texas and Florida, which include areas susceptible to hurricanes or tropical storms. Such weather conditions can disrupt our operations, result in damage to our branch office locations or negatively affect the local economies in which we operate. We cannot predict whether or to what extent damage caused by future hurricanes or storms will affect our operations or the economies in our market areas, but such weather conditions could result in a decline in loan originations and an increase in the

risk of delinquencies, foreclosures or loan losses. Our business or results of operations may be adversely affected by these and other negative effects of devastating hurricanes or storms.

We face risks in connection with completed or potential acquisitions.

          Historically, we have grown through the acquisition of other financial institutions as well as the development of de novo offices. If appropriate opportunities present themselves, we intend to pursue additional acquisitions in the future that we believe are strategic, including possible FDIC-assisted transactions. There can be no assurance that we will be able to identify, negotiate or finance potential acquisitions successfully or integrate such acquisitions with our current business.

          Upon completion of an acquisition, we are faced with the challenges of integrating the operations, services, products, personnel and systems of acquired companies into our business, which may divert management’s attention from ongoing business operations. We cannot assure you that we will be successful in effectively integrating any acquisition into the operations of our business. Moreover, there can be no assurance that the anticipated benefits of any acquisition will be realized.

          The success of our acquisitions is dependent on the continued employment of key employees. If acquired businesses do not meet projected revenue targets, or if certain key employees were to leave, we could conclude that the value of the businesses has decreased and that the related goodwill has been impaired. If we were to conclude that goodwill has been impaired, it would result in an impairment of goodwill charge to us, which would adversely affect our results of operations.

Issuing additional shares of our common stock to acquire other banks, bank holding companies, financial holding companies and/or insurance agencies may result in dilution for existing shareholders and may adversely affect the market price of our stock.

          In connection with our growth strategy, we have issued, and may issue in the future, shares of our common stock to acquire additional banks, bank holding companies, financial holding companies, insurance agencies and/or other businesses related to the financial services industry that may compliment our organizational structure. Resales of substantial amounts of common stock in the public market and the potential of such sales could adversely affect the prevailing market price of our common stock and impair our ability to raise additional capital through the sale of equity securities. We usually must pay an acquisition premium above the fair market value of acquired assets for the acquisition of banks, bank holding companies, financial holding companies and insurance agencies. Paying this acquisition premium, in addition to the dilutive effect of issuing additional shares, may also adversely affect the prevailing market price of our common stock.

Our ability to declare and pay dividends is limited by law.

          We derive our income primarily from dividends received from owning the Bank’s common stock. Federal and state law limit the Bank’s ability to declare and pay dividends. In addition, the Federal Reserve may impose restrictions on our ability to declare and pay dividends on our common stock.

Our growth strategy includes risks that could have an adverse effect on financial performance.

          A significant element of our growth strategy is the acquisition of additional banks (which might include the acquisition of bank assets in FDIC-assisted transactions), bank holding companies, financial holding companies, insurance agencies and/or other businesses related to the financial services industry that may compliment our organizational structure in order to achieve greater economies of scale. We cannot assure you that appropriate growth opportunities will continue to exist, that we will be able to acquire banks, insurance agencies, bank holding companies and/or financial holding companies that satisfy our criteria or that any such acquisitions will be on terms favorable to us. Further, our growth strategy requires that we continue to hire qualified personnel, while concurrently expanding our managerial and operational infrastructure. We cannot assure you that we will be able to hire and retain qualified personnel or that we will be able to successfully expand our infrastructure to accommodate future acquisitions or growth. As a result of these factors, we may not realize the expected economic benefits associated with our acquisitions. This could have a material adverse effect on our financial performance.

Diversification in types of financial services may adversely affect our financial performance.

     As part of our business strategy, we may further diversify our lines of business into areas that are not traditionally associated with the banking business. As a result, we would need to manage the development of new business lines in which we have not previously participated. Each new business line would require the investment

of additional capital and the significant involvement of our senior management to develop and integrate the service subsidiaries with our traditional banking operations. We can offer no assurances that we will be able to develop and integrate new services without adversely affecting our financial performance.

We compete with other financial holding companies, bank holding companies, banks, insurance and financial services companies.

          The banking, insurance and financial services businesses are extremely competitive in our service areas in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Florida, Missouri and Illinois. We compete, and will continue to compete, with well-established banks, credit unions, insurance agencies and other financial institutions, some of which have significantly greater resources and lending limits. Some of our competitors provide certain services that we do not provide.

Information systems may experience an interruption or breach in security.

          We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of these information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of these information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We may be adversely affected by the failure of certain third party vendors to perform.

          We rely upon certain third party vendors to provide products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level agreements. We maintain a system of policies and procedures designed to monitor vendor risks. While we believe these policies and procedures help to mitigate risk, the failure of an external vendor to perform in accordance with applicable contractual arrangements or service level agreements could be disruptive to our operations, which could have a material adverse effect on our financial condition and results of operations.

Anti-takeover provisions may discourage a change of our control.

          Our governing documents and certain agreements to which we are a party contain provisions that make a change-in-control difficult to accomplish, and may discourage a potential acquirer. These include a classified or “staggered” Board of Directors, change-in-control agreements with members of management and supermajority voting requirements. These anti-takeover provisions may have an adverse effect on the market for our common stock.

Securities that we issue, including our common stock, are not FDIC insured.

          Securities that we issue, including our common stock, are not savings or deposit accounts or other obligations of any bank and are not insured by the FDIC or any other governmental agency or instrumentality or any private insurer and are subject to investment risk, including the possible loss of your investment.

We reported a material weakness in our internal control over financial reporting, and if we are unable to improve our internal controls, our financial results may not be accurately reported.

          Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010 identified a material weakness in its internal control over financial reporting designed to ensure proper accounting for allowance for credit losses, as described in “Item 9A. Controls and Procedures.” This material weakness, or difficulties encountered in implementing new or improved controls or remediation, could prevent us from accurately reporting our financial results, result in material misstatements in our financial statements or cause us to fail to meet our reporting obligations. Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, the price of our common stock and market confidence in our reported financial information.

We could be required to write down goodwill and other intangible assets.

          When we acquire a business, a portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired. At December 31, 2010, our goodwill and other identifiable intangible assets were $289.7 million. Under current accounting standards, if we determine goodwill or intangible assets are impaired, we are required to write down the carrying value of these assets. We conduct a review at least annually to determine whether goodwill and other identifiable intangible assets are impaired. We completed such an impairment analysis in 2010 and concluded that no impairment charge was necessary for the year ended December 31, 2010. We cannot provide assurance, however, that we will not be required to take an impairment charge in the future. Any impairment charge would have an adverse effect on our shareholders’ equity and financial results and could cause a decline in our stock price.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

          None.

ITEM 2. PROPERTIES.

          The physical properties of the Company are held by its subsidiaries as follows:

	a.		The Bank — The main office is located at One Mississippi Plaza, 201 South Spring Street in the central business district of Tupelo, Mississippi in a seven-floor, modern, glass, concrete and steel office building owned by the Bank. The Bank occupies approximately 75% of the space, with the remainder leased to various unaffiliated tenants.
			The Bank owns 253 of its 282 branch banking facilities. The remaining 29 branch banking facilities are occupied under leases with unexpired terms ranging from one to 13 years. The Bank also owns other buildings that provide space for computer operations, lease servicing, mortgage lending, warehouse needs and other general purposes.
			The Bank considers all its buildings and leased premises to be in good condition. The Bank also owns parcels of property acquired under foreclosure.
	b.		BancorpSouth Insurance Services, Inc. — This wholly-owned subsidiary of the Bank owns six of the 25 offices it occupies. It leases 19 offices that have unexpired terms varying in duration from one to seven years.

ITEM 3. LEGAL PROCEEDINGS.

          The Company and its subsidiaries are engaged in lines of business that are heavily regulated and involve a large volume of financial transactions with numerous customers through offices in nine states. Although the Company and its subsidiaries have developed policies and procedures to minimize the impact of legal noncompliance and other disputes, litigation presents an ongoing risk.

          On May 12, 2010, the Company and its Chief Executive Officer, President and Chief Financial Officer were named in a purported class-action lawsuit filed in the U.S. District Court for the Middle District of Tennessee on behalf of certain purchasers of the Company’s common stock. On September 17, 2010, an Executive Vice President of the Company was added as a party to the lawsuit. The amended complaint alleges that the defendants issued materially false and misleading statements regarding the Company’s business and financial results. The plaintiff seeks class certification, an unspecified amount of damages and awards of costs and attorneys’ fees and such other equitable relief as the Court may deem just and proper. No class has been certified and, at this stage of the lawsuit, management cannot determine the probability of an unfavorable outcome to the Company. Although it is not possible to predict the ultimate resolution or financial liability with respect to this litigation, management is currently of the opinion that the outcome of this lawsuit will not have a material adverse effect on the Company’s business, consolidated financial position or results of operations.

          In November 2010, the Company was informed that the Atlanta Regional Office of the Securities and Exchange Commission had issued an Order of Investigation related to the Company’s delay in filing its Annual Report on Form 10-K for year ended December 31, 2009 and related matters. The Company is cooperating fully with the SEC. No claims have been made by the SEC against the Company or against any individuals affiliated with the Company. At this time, it is not possible to predict when or how the investigation will be resolved or the cost or potential liabilities associated with this matter.

          On May 18, 2010, the Bank was named as a defendant in a purported class action lawsuit filed by two Arkansas customers of the Bank in the U.S. District Court for the Northern District of Florida. The suit challenges the manner in which overdraft fees were charged and the policies related to posting order of debit card and ATM transactions. The suit also makes a claim under Arkansas’ consumer protection statute. The case was transferred to pending multi-district litigation in the U.S. District Court for the Southern District of Florida. No class has been certified and, at this stage of the lawsuit, management of the Company cannot determine the probability of an unfavorable outcome to the Company. Although it is not possible to predict the ultimate resolution or financial liability with respect to this litigation, management is currently of the opinion that the outcome of this lawsuit will not have a material adverse effect on the Company’s business, consolidated financial position or results of operations.

          Otherwise, the Company and its subsidiaries are defendants in various lawsuits arising out of the normal course of business, including claims against entities to which the Company is a successor as a result of business combinations. In the opinion of management, the ultimate resolution of these lawsuits should not have a material adverse effect on the Company’s business, consolidated financial position or results of operations. It is possible, however, that future developments could result in an unfavorable ultimate outcome for or resolution of any one or more of the lawsuits in which the Company or its subsidiaries are defendants, which may be material to the Company’s results of operations for a particular quarterly reporting period. Litigation is inherently uncertain, and management of the Company cannot make assurances that the Company will prevail in any of these actions, nor can it reasonably estimate the amount of damages that the Company might incur.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET FOR COMMON STOCK

          The common stock of the Company trades on the New York Stock Exchange under the symbol “BXS.” The following table sets forth, for the quarters indicated, the range of sale prices of the Company’s common stock as reported on the New York Stock Exchange:

						High				Low
2010		Fourth				$	16.31			$	12.27
		Third					18.73				12.41
		Second					23.25				17.86
		First					24.75				17.55
2009		Fourth				$	25.19			$	21.71
		Third					24.96				19.41
		Second					25.30				19.46
		First					23.87				15.60

HOLDERS OF RECORD

          As of February 14, 2011, there were 8,817 shareholders of record of the Company’s common stock.

DIVIDENDS

          The Company declared cash dividends each quarter in an aggregate annual amount of $0.88 per share during 2010 and 2009. Future dividends, if any, will vary depending on the Company’s profitability, anticipated capital requirements and applicable federal and state regulations. The Company is further restricted by the Federal Reserve’s authority to limit or prohibit the payment of dividends, as outlined in SR 09-4. Based on management’s discussions with the Federal Reserve in the first quarter of 2011, the Company’s Board of Directors declared a dividend of $0.11 per share for the first quarter of 2011, down from $0.22 per share for the previous quarter. There can be no assurance that the Federal Reserve Board will not limit or prohibit future dividends. See “Item 1. Business — Regulation and Supervision” and Note 17 to the Company’s Consolidated Financial Statements included elsewhere in this Report for more information on restrictions and limitations on the Company’s ability to pay dividends.

ISSUER PURCHASES OF EQUITY SECURITIES

          The Company did not repurchase any shares of its common stock during the three months ended December 31, 2010.

ITEM 6. SELECTED FINANCIAL DATA.

          See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Selected Financial Information” for the Selected Financial Data.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

          The Company is a regional financial holding company with $13.6 billion in assets headquartered in Tupelo, Mississippi. The Company’s wholly-owned banking subsidiary has commercial banking operations in Mississippi, Tennessee, Alabama, Arkansas, Texas, Louisiana, Florida, and Missouri. The Bank and its consumer finance, credit insurance, insurance agency and brokerage subsidiaries provide commercial banking, leasing, mortgage origination and servicing, insurance, brokerage and trust services to corporate customers, local governments, individuals and other financial institutions through an extensive network of branches and offices. The Bank’s insurance agency subsidiary also operates an office in Illinois.

          Management’s discussion and analysis provides a narrative discussion of the Company’s financial condition and results of operations for the previous three years. For a complete understanding of the following discussion, you should refer to the Consolidated Financial Statements and related Notes presented elsewhere in this Report. This discussion and analysis is based on reported financial information, and certain amounts for prior years have been reclassified to conform with the current financial statement presentation. The information that follows is provided to enhance comparability of financial information between years and to provide a better understanding of the Company’s operations.

          As a financial holding company, the financial condition and operating results of the Company are heavily influenced by economic trends nationally and in the specific markets in which the Company’s subsidiaries provide financial services. Generally, during the past two years, the pressures of the national and regional economic cycle have created a difficult operating environment for the financial services industry. The Company is not immune to such pressures and the continuing economic downturn has had a negative impact on the Company and its customers in all of the markets that it serves. The impact was reflected in a decline in credit quality and increases in the Company’s measures of non-performing loans and leases (“NPLs”) and net charge-offs in 2010 compared to 2009. While NPLs and net charge-offs have increased, management believes that the Company is well positioned with respect to overall credit quality and the strength of its allowance for credit losses to meet the challenges of the

current economic cycle.Management believes, however, that continued weakness in the economic environment could adversely affect the strength of the credit quality of the Company’s assets overall. Therefore, management will continue to focus on early identification and resolution of any credit issues.

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

          The information that follows is provided to enhance comparability of financial information between periods and to provide a better understanding of the Company’s operations.

SELECTED FINANCIAL INFORMATION

		Year Ended December 31,
		2010				2009				2008				2007				2006
						(Dollars in thousands, except per share amounts)
Earnings Summary:
Interest revenue		$	582,762			$	615,414			$	705,413			$	801,242			$	681,891
Interest expense			141,620				170,515				264,577				378,343				296,092
Net interest revenue			441,142				444,899				440,836				422,899				385,799
Provision for credit losses			204,016				117,324				56,176				22,696				8,577
Net interest revenue, after provision for credit losses			237,126				327,575				384,660				400,203				377,222
Noninterest revenue			264,144				275,276				245,607				232,151				207,017
Noninterest expense			487,033				490,017				455,913				428,410				394,077
Income before income taxes			14,237				112,834				174,354				203,944				190,162
Income tax (benefit) expense			(8,705	)			30,105				53,943				66,001				64,968
Net income		$	22,942			$	82,729			$	120,411			$	137,943			$	125,194
Balance Sheet — Year-End Balances:
Total assets		$	13,615,010			$	13,167,867			$	13,480,218			$	13,189,841			$	12,040,521
Total securities			2,709,081				1,993,594				2,316,380				2,627,110				2,765,419
Loans and leases, net of unearned income			9,333,107				9,775,136				9,691,277				9,179,684				7,871,471
Total deposits			11,490,021				10,677,702				9,711,872				10,064,099				9,710,578
Long-term debt			110,000				112,771				286,312				88,977				135,707
Total shareholders’ equity			1,222,244				1,276,296				1,240,260				1,196,626				1,026,585
Balance Sheet — Average Balances:
Total assets			13,304,836				13,203,659				13,200,801				12,857,135				11,798,007
Total securities			2,157,096				2,179,479				2,417,390				2,781,232				2,943,556
Loans and leases, net of unearned income			9,621,529				9,734,580				9,429,963				8,784,940				7,579,935
Total deposits			11,107,445				10,155,730				9,803,999				10,200,098				9,554,441
Long-term debt			111,547				290,582				278,845				139,537				136,411
Total shareholders’ equity			1,241,321				1,255,605				1,224,280				1,121,000				999,989
Common Share Date:
Basic earnings per share		$	0.28			$	0.99			$	1.46			$	1.69			$	1.58
Diluted earnings per share			0.27				0.99				1.45				1.69				1.57
Cash dividends per share			0.88				0.88				0.87				0.83				0.79
Book value per share			14.64				15.29				14.92				14.54				12.98
Dividend payout ratio			314.29				88.89				60.00				49.11				50.32
Financial Ratios:
Return on average assets			0.17	%			0.63	%			0.91	%			1.07	%			1.06	%
Return on average shareholders’ equity			1.85	%			6.59	%			9.84	%			12.31	%			12.52	%
Total shareholders’ equity to total assets			8.98	%			9.69	%			9.20	%			9.07	%			8.53	%
Tangible shareholders’ equity to tangible assets			7.00	%			7.63	%			7.15	%			7.09	%			7.25	%
Net interest margin-fully taxable equivalent			3.70	%			3.77	%			3.75	%			3.68	%			3.70	%
Credit Quality Ratios:
Net charge-offs to average loans and leases			1.90	%			0.76	%			0.40	%			0.14	%			0.15	%
Provision for credit losses to average loans and leases			2.12	%			1.21	%			0.60	%			0.26	%			0.11	%
Allowance for credit losses to net loans and leases			2.11	%			1.80	%			1.37	%			1.25	%			1.26	%
Allowance for credit losses to NPLs			49.93	%			94.41	%			207.45	%			394.76	%			421.36	%
Allowance for credit losses to NPAs			37.31	%			71.64	%			120.36	%			215.47	%			291.38	%
NPLs to net loans and leases			4.23	%			1.91	%			0.66	%			0.32	%			0.30	%
NPAs to net loans and leases			5.65	%			2.51	%			1.14	%			0.58	%			0.43	%
Capital Adquacy:
Tier I capital			10.61	%			11.17	%			10.79	%			10.63	%			12.34	%
Total capital			11.87	%			12.42	%			12.04	%			11.81	%			13.55	%
Tier I leverage capital			8.07	%			8.95	%			8.65	%			8.13	%			8.73	%

In addition to financial ratios defined by U.S. GAAP, the Company utilizes tangible shareholders’ equity and tangible asset measures when evaluating the performance of the Company. Tangible shareholders’ equity is defined by the Company as total shareholders’ equity less goodwill and identifiable intangible assets. Tangible assets are defined by the Company as total assets less goodwill and identifiable intangible assets. Management believes the ratio of tangible equity to tangible assets to be an important measure of financial strength of the Company. The following table reconciles tangible assets and tangible shareholders’ equity as presented above to U.S. GAAP financial measure as reflected in the Company’s unaudited consolidated financial statements:

		Year Ended December 31,
		2010				2009				2008				2007				2006
		(In thousands)
Tangible Assets:
Total assets		$	13,615,010			$	13,167,867			$	13,480,218			$	13,189,841			$	12,040,521
Less: Goodwill			270,097				270,097				268,966				254,889				143,718
Identifiable intangible assets			19,624				23,533				28,164				26,549				22,442
Total tangible assets		$	13,325,289			$	12,874,237			$	13,183,088			$	12,908,403			$	11,874,361
Tangible Shareholders’ Equity
Total shareholders’ equity		$	1,222,244			$	1,276,296			$	1,240,260			$	1,196,626				1,026,585
Less: Goodwill			270,097				270,097				268,966				254,889				143,718
Identifiable intangible assets			19,624				23,533				28,164				26,549				22,442
Total tangible shareholders’ equity		$	932,523			$	982,666			$	943,130			$	915,188			$	860,425

FINANCIAL HIGHLIGHTS

          The Company reported net income of $22.9 million for 2010 compared to $82.7 million in 2009 and $120.4 million in 2008. The provision for credit losses was the most significant factor contributing to this decrease in earnings, as the provision for credit losses was $204.0 million in 2010 compared to $117.3 million in 2009 and $56.2 million in 2008. Net charge-offs also increased to $183.1 million, or 1.90% of average loans and leases in 2010, compared to $74.1 million, or 0.76% of average loans and leases in 2009. The increase in the provision for credit losses in 2010 reflected the impact of a significant increase in NPLs from $186.5 million at December 31, 2009 to $394.4 million at December 31, 2010, as the length and severity of the recession, as well as the lackluster current economic environment, affected a larger portion of the Company’s borrowers. This pressure continues to be evident on real estate construction, acquisition and development loans and more specifically on residential construction, acquisition and development and commercial construction loans. Many of these loans became collateral-dependant during 2009 and 2010, requiring recognition of an impairment loss to reflect the decline in real estate values.

          The largest source of revenue for the Company is the amount of net interest revenue earned by the Bank. Net interest revenue is the difference between interest earned on loans and investments and interest paid on deposits and other obligations. Net interest revenue for 2010 was $441.1 million, compared to $444.9 million for 2009 and $440.8 million for 2008. Net interest revenue is affected by the general level of interest rates, changes in interest rates and changes in the amount and composition of interest earning assets and interest bearing liabilities. The Company’s long-term objective is to manage those assets and liabilities to maximize net interest revenue, while balancing interest rate, credit, liquidity and capital risks. The Company experienced an increase in lower rate demand and time deposits and a decrease in higher rate long-term borrowing, which resulted in a decrease in interest expense of $28.9 million or 17.0% in 2010 compared to 2009. However, the declining interest rate environment combined with the low loan demand resulted in a decrease in interest revenue of $32.7 million or 5.3%, causing net interest revenue to remain stable in 2010 compared to 2009. While loan demand has been weak, the Company has managed to replace some loan runoff with new loan production, primarily in its east Texas and Louisiana markets.

          The Company attempts to diversify its revenue stream by increasing the amount of revenue received from mortgage lending operations, insurance agency activities, brokerage and securities activities and other activities that generate fee income. Management believes this diversification is important to reduce the impact of fluctuations in

net interest revenue on the overall operating results of the Company. Noninterest revenue for 2010 was $264.1 million, compared to $275.3 million for 2009 and $245.6 million in 2008. One of the contributors to the decrease in noninterest revenue in 2010 was the decrease in mortgage lending revenue, which decreased to $29.7 million in 2010 compared to $32.2 million in 2009. The decrease in mortgage lending revenue was primarily a result of larger mortgage originations in 2009, the majority of which were refinancings in the first half of 2009 resulting from historically low mortgage interest rates. Also contributing to the decrease in mortgage lending revenue was the $4.0 million decline in the fair value of the Bank’s mortgage servicing rights in 2010 compared to a $2.4 million increase in the fair value in 2009. The decline in fair value was somewhat offset by the better pricing and delivery execution on a lower level of mortgage originations for 2010 as origination volume decreased 6.6% to $1.4 billion from $1.5 billion in 2009.

          Noninterest revenue was positively impacted by the 10.0% increase in credit card, debit card and merchant fee income, as the number and monetary volume of items processed increased. Noninterest revenue was also positively impacted by net security gains of $2.6 million in 2010 compared to net security losses of approximately $55,000 in 2009. The Company recognized $4.7 million of gains on sales and calls of available-for-sale securities and calls of held-to-maturity securities in 2010, with these gains somewhat offset by $2.1 million recognized as other-than-temporary impairment on pooled trust preferred securities in 2010. The 2009 and 2008 net security losses included other-than-temporary impairment charges of approximately $250,000 and $8.6 million, respectively, related to the Company’s investment in pooled trust preferred securities.

          Revenue from bank-owned life insurance decreased approximately $877,000, or 10.2%, in 2010 after increasing $1.3 million, or 17.4% in 2009 as the Company recorded claims related to bank-owned life insurance of $1.4 million in 2009 compared to approximately $723,000 in 2010. No significant claims related to bank-owned life insurance were recorded in 2008. Other miscellaneous noninterest revenue decreased $13.8 million, or 48.9%, in 2010 compared to 2009. There were no significant non-recurring noninterest revenue items in 2010. In 2009, the Company recorded interest on tax refunds of $2.8 million, gains on the sale of student loans of $3.7 million, a gain of $1.8 million on the sale of the Company’s remaining shares of MasterCard, Inc. common stock, and an insurance recovery of $1.3 million related to a casualty loss.

          Noninterest expense for 2010 was $487.0 million, a decrease of 0.6% from $490.0 million for 2009, which was an increase of 7.5% from $455.9 million for 2008. The increase in noninterest expense in 2009 compared to 2008 was primarily related to the significant increase in deposit insurance assessments in 2009 compared to 2008. Deposit insurance assessments increased $16.8 million during 2009 which included a $6.1 million special FDIC assessment during the second quarter of 2009 as part of the FDIC’s restoration plan for the Deposit Insurance Fund. Excluding the $6.1 million special FDIC assessment in 2009, deposit insurance assessments increased in 2010 compared to 2009, as the Company’s depository insurance assessment base, or average deposits, increased 9.4% during 2010. Income tax expense decreased in 2010 and 2009 primarily as a result of the decrease in pretax income in both years. The major components of net income are discussed in more detail in the various sections that follow.

          The Company continued its commitment to a strong capital base as its total shareholders’ equity to total assets ratio was 8.98%, 9.69% and 9.20% in 2010, 2009 and 2008, respectively. Also, interest bearing demand deposits increased 14.1% contributing to an overall deposit increase of 7.6% in 2010 compared to 2009. Interest bearing demand deposits increased 10.7% in 2009 contributing to an overall deposit increase of 9.94% compared to 2008. This increase in deposits allowed the Company to continue to reduce its reliance on short-term borrowings, which decreased 40.4% to $443.3 million at December 31, 2010 after decreasing 60.8% to $743.4 million at December 31, 2009 compared to $1.9 billion at December 31, 2008.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP, which require the Company to make estimates and assumptions (see Note 1 to the Company’s Consolidated Financial Statements included elsewhere in this Report). Management believes that its determination of the allowance for credit losses, valuation of other real estate owned, the annual goodwill impairment assessment, the assessment for other-than-temporary impairment of securities, the valuation of mortgage servicing rights and the estimation of pension and other postretirement benefit amounts involve a higher degree of judgment and complexity than the Company’s other significant accounting policies. Further, these estimates can be materially impacted by changes in market conditions or the actual or perceived financial condition of the Company’s borrowers, subjecting the Company to significant volatility of earnings.

Allowance for Credit Losses

          The allowance for credit losses is established through the provision for credit losses, which is a charge against earnings. Provisions for credit losses are made to reserve for estimated probable losses on loans and leases. The allowance for credit losses is a significant estimate and is regularly evaluated by the Company for adequacy by taking into consideration factors such as changes in the nature and volume of the loan and lease portfolio; trends in actual and forecasted portfolio credit quality, including delinquency, charge-off and bankruptcy rates; and current economic conditions that may affect a borrower’s ability to pay. In determining an adequate allowance for credit losses, management makes numerous assumptions, estimates and assessments. The use of different estimates or assumptions could produce different provisions for credit losses. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Provisions for Credit Losses and Allowance for Credit Losses” included herein for more information. At December 31, 2010, the allowance for credit losses was $196.9 million, representing 2.11% of total loans and leases, net of unearned income.

Other Real Estate Owned

          Other real estate owned, consisting of assets that have been acquired through foreclosure or in satisfaction of loans, is carried at the lower of cost or fair value, less estimated selling costs. Fair value is based on independent appraisals and other relevant factors. Other real estate owned is revalued on an annual basis or more often if market conditions necessitate. Valuation adjustments required at foreclosure are charged to the allowance for credit losses. Subsequent valuation adjustments on the periodic revaluation of the property are charged to net income as noninterest expense. Significant judgments and complex estimates are required in estimating the fair value of other real estate owned, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility, as experienced during the past two years. As a result, the net proceeds realized from sales transactions could differ significantly from appraisals, comparable sales, and other estimates used to determine the fair value of other real estate owned.

Goodwill

          The Company’s policy is to assess goodwill for impairment at the reporting segment level on an annual basis or sooner if an event occurs or circumstances change which indicate that the fair value of a reporting unit is below its carrying amount. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. Accounting standards require management to estimate the fair value of each reporting segment in assessing impairment at least annually. The Company’s annual assessment date is during the Company’s fourth quarter. Because of the volatile market conditions during which the Company’s market value fell below book value, the Company performed a complete goodwill impairment analysis for all of its reporting segments during the third quarter of 2010. Based on this analysis, the estimated fair value of all of the Company’s reporting segments exceeded the respective carrying values. The Company’s annual goodwill impairment evaluation performed during the fourth quarter of 2010 also indicated no impairment of goodwill for its reporting units. Therefore, no goodwill impairment was recorded. In the current environment, forecasting cash flows, credit losses and growth in addition to valuing the Company’s assets with any degree of assurance is very difficult and subject to significant changes over very short periods of time. Management will continue to update its analysis as circumstances change. As market conditions continue to be volatile and unpredictable, impairment of goodwill related to the Company’s reporting segments may be necessary in future periods. Goodwill was $270.1 million at December 31, 2010.

Assessment for Other-Than-Temporary Impairment of Securities

          Securities are evaluated periodically to determine whether a decline in their value is other-than-temporary. The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near term recovery of value are not necessarily favorable. Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, and whether the Company would be required to sell the securities before a full recovery of costs in order to predict whether the loss in value is other-than-temporary. Once a decline in value is determined to be other-than-temporary, the impairment is separated into (a) the amount of the impairment related to the credit loss and (b) the amount of the impairment related to all other factors. The value of the security is reduced by the other-than-temporary impairment with the amount of the impairment related to credit loss recognized as a charge to earnings and the amount of the impairment related to all other factors recognized in other comprehensive income.

Mortgage Servicing Rights

          The Company recognizes as assets the rights to service mortgage loans for others, known as mortgage servicing rights (“MSRs”). The Company records MSRs at fair value on a recurring basis with subsequent remeasurement of MSRs based on change in fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 860, Transfers and Servicing (“FASB ASC 860”). An estimate of the fair value of the Company’s MSRs is determined utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the MSRs is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different estimates or assumptions could also produce different fair values. The Company does not hedge the change in fair value of MSRs and, therefore, the Company is susceptible to significant fluctuations in the fair value of its MSRs in changing interest rate environments. At December 31, 2010, the Company’s mortgage servicing asset was valued at $38.6 million.

Pension and Postretirement Benefits

          Accounting for pension and other postretirement benefit amounts is another area where the accounting guidance requires management to make various assumptions in order to appropriately value any related asset or liability. Estimates that the Company makes to determine pension-related assets and liabilities include actuarial assumptions, expected long-term rate of return on plan assets, rate of compensation increase for participants and discount rate. Estimates that the Company makes to determine asset and liability amounts for other postretirement benefits include actuarial assumptions and a discount rate. Changes in these estimates could impact earnings. For example, lower expected long-term rates of return on plan assets could negatively impact earnings, as would lower estimated discount rates or higher rates of compensation increase. In estimating the projected benefit obligation, actuaries must make assumptions about such factors as mortality rate, turnover rate, retirement rate, disability rate and the rate of compensation increases. The Company accounts for the over-funded or under-funded status of its defined benefit and postretirement plans as an asset or liability in its consolidated balance sheets and recognizes changes in that funded status in the year in which the changes occur through comprehensive income as required by FASB ASC 715, Compensation – Retirement Benefits (“FASB ASC 715”). In accordance with FASB ASC 715, the Company calculates the expected return on plan assets each year based on the balance in the pension asset portfolio at the beginning of the year and the expected long-term rate of return on that portfolio. In determining the reasonableness of the expected rate of return, the Company considers a variety of factors including the actual return earned on plan assets, historical rates of return on the various asset classes of which the plan portfolio is comprised and current/prospective capital market conditions and economic forecasts. The Company used an expected rate of return of 8% on plan assets for 2010. The discount rate is the rate used to determine the present value of the Company’s future benefit obligations for its pension and other postretirement benefit plans. The Company determines the discount rate to be used to discount plan liabilities at the measurement date with the assistance of our actuary using the Citigroup Pension Discount Curve. The Company developed a level equivalent yield using the expected cash flows from the BancorpSouth, Inc. Retirement Plan (the “Basic Plan”), the BancorpSouth, Inc. Restoration Plan (the “Restoration Plan”) and the BancorpSouth, Inc. Supplemental Executive Retirement Plan (the “Supplemental Plan”) and the December 31, 2010 Citigroup Pension Discount Curve. The Citigroup Pension Discount Curve is published on the Society of Actuaries website along with a background paper on the interest rate curve. Based on this analysis, the Company established its discount rate assumptions for determination of the projected benefit obligation at 5.50% for the Basic Plan, 5.15% for the Restoration Plan and 4.50% for the Supplemental Plan based on a December 31, 2010 measurement date.

RESULTS OF OPERATIONS

Net Interest Revenue

          Net interest revenue is the difference between interest revenue earned on assets, such as loans, leases and securities, and interest expense paid on liabilities, such as deposits and borrowings, and continues to provide the Company with its principal source of revenue. Net interest revenue is affected by the general level of interest rates, changes in interest rates and changes in the amount and composition of interest earning assets and interest bearing liabilities. The Company’s long-term objective is to manage interest earning assets and interest bearing liabilities to maximize net interest revenue, while balancing interest rate, credit and liquidity risk. Net interest margin is

determined by dividing fully taxable equivalent net interest revenue by average earning assets. For purposes of the following discussion, revenue from tax-exempt loans and investment securities has been adjusted to a fully taxable equivalent (“FTE”) basis, using an effective tax rate of 35%. The following tables present average interest earning assets, average interest bearing liabilities, net interest revenue-FTE, net interest margin-FTE and net interest rate spread for the three years ended December 31, 2010:

		2010												2009												2008
		Average								Yield/				Average								Yield/				Average								Yield/
(Taxable equivalent basis)		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
		(Dollars in thousands, yields on taxabale equivalent basis)
ASSETS
Loans and leases (net of unearned income) (1)(2)		$	9,621,529			$	500,108				5.20	%		$	9,734,580			$	520,315				5.35	%		$	9,429,964			$	593,258				6.29	%
Loans held for sale			68,980				3,024				4.38	%			115,181				3,965				3.44	%			156,857				7,667				4.89	%
Held-to-maturity securities:
Taxable (3)			985,606				36,718				3.73	%			1,015,440				47,397				4.67	%			1,282,512				59,119				4.61	%
Non-taxable (4)			236,530				16,014				6.77	%			194,370				13,619				7.01	%			184,243				12,480				6.77	%
Available-for-sale securities:
Taxable			863,091				32,033				3.71	%			898,073				35,026				3.90	%			859,932				35,813				4.16	%
Non-taxable (5)			71,869				5,039				7.01	%			71,596				5,223				7.30	%			90,703				6,470				7.13	%
Federal funds sold, securities purchased under agreement to resell and short-term investments			376,328				961				0.26	%			49,197				205				0.42	%			32,930				972				2.95	%
Total interest earning assets and revenue			12,223,933				593,897				4.86	%			12,078,437				625,750				5.18	%			12,037,141				715,779				5.95	%
Other assets			1,293,963												1,275,150												1,291,675
Less: allowance for credit losses			(213,060	)											(149,928	)											(128,015	)
Total		$	13,304,836											$	13,203,659											$	13,200,801

LIABILITIES AND
SHAREHOLDERS’ EQUITY
Deposits:

Demand — interest bearing		$	4,649,235			$	35,187				0.76	%		$	4,051,362			$	40,047				0.99	%		$	3,552,690			$	60,333				1.70	%
Savings			784,504				3,576				0.46	%			712,740				3,700				0.52	%			712,330				5,280				0.74	%
Other time			3,782,727				83,999				2.22	%			3,633,453				101,308				2.79	%			3,874,192				148,591				3.84	%
Federal funds purchased,securities sold under agreement to repurchase, short-term FHLB borrowings and other short term borrowings			539,524				1,384				0.26	%			1,175,708				2,378				0.20	%			1,565,381				26,858				1.72	%
Junior subordinated debt securities			160,312				11,461				7.15	%			160,312				11,630				7.25	%			160,312				12,469				7.78	%
Long-term FHLB borrowings			111,547				6,013				5.38	%			290,582				11,452				3.93	%			278,845				11,046				3.95	%
Total interest bearing liabilities and expense			10,027,849				141,620				1.41	%			10,024,157				170,515				1.70	%			10,143,750				264,577				2.61	%
Demand deposits - noninterest bearing			1,890,979												1,758,175												1,664,787
Other liabilities			144,687												165,722												167,984
Total liabilities			12,063,515												11,948,054												11,976,521
Shareholders’ equity			1,241,321												1,255,605												1,224,280
Total		$	13,304,836											$	13,203,659											$	13,200,801
Net interest revenue-FTE						$	452,277											$	455,235											$	451,202
Net interest margin-FTE											3.70	%											3.77	%											3.75	%
Net interest rate spread											3.45	%											3.48	%											3.34	%
Interest bearing liabilities to interest earning assets											82.03	%											82.99	%											84.27	%

          Net interest revenue-FTE decreased 0.7% to $452.3 million in 2010 from $455.2 million in 2009, which represented an increase of 0.9% from $451.2 million in 2008. The slight decrease in net interest revenue-FTE for 2010 compared to 2009 was a result of continued deposit growth, combined with a decrease in net loans and leases, resulting in an increase in short-term investments that had lower average rates earned than the average rates paid on the deposit growth. Overall, the yield on interest earning assets declined 32 basis points to 4.86% in 2010 from 5.18% in 2009, which exceeded the decline of 29 basis points in the average rate paid on interest bearing liabilities to 1.41% in 2010 from 1.70% in 2009. The slight increase in net interest revenue-FTE for 2009 compared to 2008 was a result of rates paid on interest bearing liabilities declining at a faster rate than rates earned on interest earning assets. The decline in rates paid on interest bearing liabilities was a result of the increase in low cost demand deposits coupled with the decline in other time deposits and short-term borrowing rates. The declining loan yields experienced by the Company was a result of reduced interest rates with this decline being somewhat offset by the impact of the interest rate floors evident on a portion of the Company’s variable rate loans. The effect of the interest rate floors on the Company’s variable rate loans is more fully discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Interest Rate Sensitivity.”

          Interest revenue-FTE decreased 5.1% to $593.9 million in 2010 from $625.8 million in 2009, which represented a decrease of 12.6% from $715.8 million in 2008. The decrease in interest revenue-FTE in 2010 and 2009 was primarily a result of the declining loan yields as interest rates were at historically low levels resulting in an overall decrease in the yield on average interest earning assets of 32 basis points during 2010 and 76 basis points during 2009. Average interest earning assets increased $145.5 million, or 1.2%, to $12.2 billion in 2010 and increased $41.8 million, or 0.4%, to $12.1 billion in 2009 from $12.0 billion in 2008. The increase in average interest earning assets during 2010 was primarily a result of the increase in short-term investments, which was attributable to continued deposit growth, combined with a decrease in net loans and leases. The increase in average interest earning assets during 2009 was primarily a result of average loans and leases increasing $305.2 million to $9.7 billion, partially offset by the decrease in average loans held for sale during 2009 as the Company sold its remaining portfolio of student loans.

          Interest expense decreased 17.0% to $141.6 million in 2010 from $170.5 million in 2009, which represented a decrease of 35.6% from $264.6 million in 2008. The decrease in interest expense during 2010 was a result of the increase in lower cost interest bearing demand deposits combined with the decrease in demand and other time deposit rates, resulting in an overall decrease in the average rate paid of 29 basis points during 2010. The decrease in interest expense during 2009 was a result of the increase in lower cost interest bearing demand deposits combined with the decrease in other time deposits and short-term borrowing rates, resulting in an overall decrease in the average rate paid on interest bearing liabilities of 91 basis points. Average interest bearing liabilities remained stable at $10.0 billion in 2010 and 2009 after decreasing $119.6 million, or 1.2%, from $10.1 billion in 2008. The decrease in short-term and long-term borrowings during 2010 was offset by the slightly larger increase in the Company’s interest bearing demand, savings and other time deposits, resulting in average interest bearing liabilities that remained flat from 2009 to 2010. The decrease in interest bearing liabilities in 2009 compared to 2008 was primarily a result of the decrease in short-term borrowings, partially offset by the increase in lower cost interest bearing demand deposits.

          Net interest margin-FTE for 2010 was 3.70%, a decrease of seven basis points from 3.77% for 2009, which represented an increase of two basis points from 3.75% for 2008. The decrease in the net interest margin-FTE during 2010 was primarily a result of the higher level of average nonaccrual loans and the reversal of current year interest for loans placed on nonaccrual status or charged off during 2010 as compared to 2009. The higher level of average nonaccrual loans and the reversal of current year interest for loans placed on nonaccrual status or charged off during 2010 decreased net interest margin-FTE by 14 basis points in 2010. Also, the combination of increased deposits and weak loan demand resulted in higher levels of short-term investments with relatively low yields. Net interest margin-FTE remained relatively stable for 2008 and 2009, as the Company was able to mitigate the effect of lower loan yields by increasing lower cost demand deposits and decreasing higher rate time deposits. The Company was also able to maintain stability in the loan portfolio from 2008 to 2009 by replacing loan runoff with modest new loan production.

          Net interest revenue-FTE may also be analyzed by segregating the rate and volume components of interest revenue and interest expense. The table below presents an analysis of rate and average volume change in net interest revenue from 2009 to 2010 and from 2008 to 2009. Changes that are not solely a result of volume or rate have been allocated to volume.

		2010 over 2009 - Increase (Decrease)												2009 over 2008 - Increase (Decrease)
(Taxable equivalent basis)		Volume				Rate				Total				Volume				Rate				Total
										(In thousands)
INTEREST REVENUE
Loans and leases (net of unearned income)		$	(5,876	)		$	(14,331	)		$	(20,207	)		$	16,282			$	(89,225	)		$	(72,943	)
Loans held for sale			(2,025	)			1,084				(941	)			(1,435	)			(2,267	)			(3,702	)
Held-to-maturity securities:
Taxable			(1,111	)			(9,568	)			(10,679	)			(12,466	)			744				(11,722	)
Non-taxable			2,854				(459	)			2,395				710				429				1,139
Available-for-sale securities:
Taxable			(1,298	)			(1,695	)			(2,993	)			1,488				(2,275	)			(787	)
Non-taxable			19				(203	)			(184	)			(1,394	)			147				(1,247	)
Federal funds sold, securities purchased under agreement to resell and short-term investments			835				(79	)			756				68				(835	)			(767	)
Total increase (decrease)			(6,602	)			(25,251	)			(31,853	)			3,253				(93,282	)			(90,029	)
INTEREST EXPENSE
Demand deposits — interest bearing			4,525				(9,385	)			(4,860	)			4,929				(25,215	)			(20,286	)
Savings deposits			327				(451	)			(124	)			2				(1,582	)			(1,580	)
Other time deposits			3,315				(20,624	)			(17,309	)			(6,712	)			(40,571	)			(47,283	)
Federal funds purchased, securities sold under agreement to repurchase, short-term FHLB borrowings and other short term borrowings			(1,632	)			638				(994	)			(788	)			(23,692	)			(24,480	)
Junior subordinated debt securities			—				(169	)			(169	)			—				(839	)			(839	)
Long-term FHLB borrowings			(9,651	)			4,212				(5,439	)			463				(57	)			406
Total increase (decrease)			(3,116	)			(25,779	)			(28,895	)			(2,106	)			(91,956	)			(94,062	)
Total net increase (decrease)		$	(3,486	)		$	528			$	(2,958	)		$	5,359			$	(1,326	)		$	4,033

Interest Rate Sensitivity

          The interest rate sensitivity gap is the difference between the maturity or repricing opportunities of interest sensitive assets and interest sensitive liabilities for a given period of time. A prime objective of asset/liability management is to maximize net interest margin while maintaining a reasonable mix of interest sensitive assets and liabilities. The following table presents the Company’s interest rate sensitivity at December 31, 2010:

		Interest Rate Sensitivity - Maturing or Repricing
						91 Days				Over One
		0 to 90				to				Year to				Over
		Days				One Year				Five Years				Five Years
						(In thousands)
INTEREST EARNING ASSETS:
Interest bearing deposits with banks		$	172,170			$	—			$	—			$	—
Federal funds sold and securities purchased under agreement to resell			150,000				—				—				—
Held-to-maturity securities			79,007				172,944				1,034,650				326,418
Available-for-sale securities			47,473				108,603				266,605				673,381
Loans and leases, net of unearned income			4,691,770				1,754,845				2,636,483				250,009
Loans held for sale			42,872				1,137				6,676				43,012
Total interest earning assets			5,183,292				2,037,529				3,944,414				1,292,820
INTEREST BEARING LIABILITIES:
Interest bearing demand and savings deposits			5,794,552				—				—				—
Other time deposits			634,860				1,750,168				1,249,058				1,238
Federal funds purchased, securities sold under agreement to repurchase, short-term FHLB borrowings and other short-term borrowings			440,593				2,727				—				—
Long-term FHLB borrowings and junior subordinated debt securities			—				—				55,000				215,312
Other			1				—				79				—
Total interest bearing liabilities			6,870,006				1,752,895				1,304,137				216,550
Interest rate sensitivity gap		$	(1,686,714	)		$	284,634			$	2,640,277			$	1,076,270
Cumulative interest sensitivity gap		$	(1,686,714	)		$	(1,402,080	)		$	1,238,197			$	2,314,467

          In the event interest rates decline after 2010, based on this interest rate sensitivity gap, it is likely that the Company would experience slightly increased net interest revenue in the following one-year period, as the cost of funds would decrease at a more rapid rate than interest revenue on interest earning assets. Conversely, in the event interest rates increase after 2010, based on this interest rate sensitivity gap, the Company would likely experience decreased net interest revenue in the following one-year period. It should be noted that the balances shown in the table above are at December 31, 2010 and may not be reflective of positions at other times during the year or in subsequent periods. Allocations to specific interest rate sensitivity periods are based on the earlier of maturity or repricing dates. The increased liability sensitivity in the 0 to 90 day category was primarily a result of the Company’s utilization of core deposit growth, particularly in short-term demand deposits, to repay borrowings and to fund asset growth during 2010.

          As of December 31, 2010, the Bank had $2.5 billion in variable rate loans with interest rates determined by a floor, or minimum rate. This portion of the loan portfolio had an average interest rate earned of 4.54%, an average maturity of 26 months and a fully-indexed interest rate of 3.77% at December 31, 2010. The fully-indexed interest rate is the interest rate that these loans would be earning without the effect of interest rate floors. While the Bank benefits from interest rate floors in the current interest rate environment, loans currently earning their floored interest rate may not experience an immediate impact on the interest rate earned should key indices rise. Key indices include, but are not limited to, the Wall Street Journal prime rate, the Bank’s prime rate and the London Interbank Offering Rate. At December 31, 2010, the Company had $1.2 billion, $1.1 billion and $96 million in variable rate loans with interest rates tied to the Bank’s prime rate, the Wall Street Journal prime rate and the London Interbank Offering Rate, respectively. The Bank’s net interest margin may be negatively impacted by the timing and magnitude of a rise in key indices.

Interest Rate Risk Management

          Interest rate risk refers to the potential changes in net interest income and Economic Value of Equity (“EVE”) resulting from adverse movements in interest rates. EVE is defined as the net present value of the balance sheet’s cash flow. EVE is calculated by discounting projected principal and interest cash flows under the current interest rate environment. The present value of asset cash flows less the present value of liability cash flows derives the net present value of the Company’s balance sheet. The Company’s Asset / Liability Committee utilizes financial simulation models to measure interest rate exposure. These models are designed to simulate the cash flow and accrual characteristics of the Company’s balance sheet. In addition, the models incorporate assumptions about the direction and volatility of interest rates, the slope of the yield curve, and the changing composition of the Company’s balance sheet arising from both strategic plans and customer behavior. Finally, management makes assumptions regarding loan and deposit growth, pricing, and prepayment speeds.

          The sensitivity analysis included below delineates the percentage change in net interest income and EVE derived from instantaneous parallel rate shifts of plus and minus 200 and 100 basis points. The impact of minus 200 and 100 basis point rate shocks as of December 31, 2010 and 2009 was not considered meaningful because of the historically low interest rate environment. Variances were calculated from the base case scenario, which reflected current market rates. Management of the Company assumed all non-maturity deposits have an average life of one day for calculating EVE, which management believes is the most conservative approach.

		Net Interest Income
		% Variance from Base Case Scenario
Rate Shock		December 31, 2010				December 31, 2009
+200 basis points			-7.4%				-4.1%
+100 basis points			-4.1%				-2.5%
-100 basis points		NM				NM
-200 basis points		NM				NM
NM=not meaningful

		Economic Value of Equity
		% Variance from Base Case Scenario
Rate Shock		December 31, 2010				December 31, 2009
+200 basis points			-15.1%				-9.5%
+100 basis points			-8.1%				-4.8%
-100 basis points		NM				NM
-200 basis points		NM				NM
NM=not meaningful

          In addition to instantaneous rate shocks, the Company monitors interest rate exposure through simulations of gradual interest rate changes over a 12-month time horizon. The results of these analyses are included in the following table.

		Net Interest Income
		% Variance from Base Case Scenario
Rate Ramp		December 31, 2010				December 31, 2009
+200 basis points			-6.1%				-4.1%
-200 basis points		NM				NM
NM=not meaningful

Provisions for Credit Losses and Allowance for Credit Losses

          In the normal course of business, the Bank assumes risks in extending credit. The Bank manages these risks through underwriting in accordance with its lending policies, loan review procedures and the diversification of its loan and lease portfolio. Although it is not possible to predict credit losses with certainty, management regularly reviews the characteristics of the loan and lease portfolio to determine its overall risk profile and quality.

          The provision for credit losses is the periodic cost of providing an allowance or reserve for estimated probable losses on loans and leases. The Bank’s Board of Directors has appointed a loan loss reserve valuation committee (the “Loan Loss Committee”), which bases its estimates of credit losses on three primary components:

(1) estimates of inherent losses that may exist in various segments of performing loans and leases; (2) specifically identified losses in individually analyzed credits; and (3) qualitative factors that may impact the performance of the loan and lease portfolio. Factors such as financial condition of the borrower and guarantor, recent credit performance, delinquency, liquidity, cash flows, collateral type and value are used to assess credit risk. Expected loss estimates are influenced by the historical losses experienced by the Bank for loans and leases of comparable creditworthiness and structure. Specific loss assessments are performed for loans and leases of significant size and delinquency based upon the collateral protection and expected future cash flows to determine the amount of impairment under FASB ASC 310, Receivables (“FASB ASC 310”). In addition, qualitative factors such as changes in economic and business conditions, concentrations of risk, loan and lease growth, acquisitions and changes in portfolio risk resulting from regulatory changes are considered in determining the adequacy of the level of the allowance for credit losses.

          Attention is paid to the quality of the loan and lease portfolio through a formal loan review process. An independent loan review department of the Bank is responsible for reviewing the credit rating and classification of individual credits and assessing trends in the portfolio, adherence to internal credit policies and procedures and other factors that may affect the overall adequacy of the allowance for credit losses. The Loan Loss Committee is responsible for ensuring that the allowance for credit losses provides coverage of both known and inherent losses. The Loan Loss Committee meets at least quarterly to determine the amount of adjustments to the allowance for credit losses. The Loan Loss Committee is composed of senior management from the Bank’s loan administration and finance departments. In 2010, the Bank established a real estate risk management group and an Impairment Committee. The real estate risk management group oversees compliance with regulations and U.S. GAAP related to lending activities where real estate is the primary collateral. The Impairment Committee is responsible for evaluating loans that have been specifically identified through various channels, including examination of the Bank’s watch list, past due listings, findings of the internal loan review department, loan officer assessments and loans to borrowers or industries known to be experiencing problems. For all loans identified, the responsible loan officer in conjunction with his credit administrator is required to prepare an impairment analysis to be reviewed by the Impairment Committee. The Impairment Committee deems that a loan is impaired if it is probable that the Company will be unable to collect the contractual principal and interest on the loan. The Impairment Committee also evaluates the circumstances surrounding the loan in order to determine if the loan officer used the most appropriate method for assessing the impairment of the loan (i.e., present value of expected future cash flows, observable market price or fair value of the underlying collateral). The Impairment Committee meets on a monthly basis.

          Loans of $200,000 or more that become 60 or more days past due are identified for review by the Impairment Committee, which decides whether an impairment exists and to what extent a specific allowance for loss should be made. Loans that do not meet these requirements may also be identified by management for impairment review. Loans subject to such review are evaluated as to collateral dependency, current collateral value, guarantor or other financial support and likely disposition. Each such loan is individually evaluated for impairment. The impairment evaluation of real estate loans generally focuses on the fair value of underlying collateral obtained from appraisals, as the repayment of these loans may be dependent on the liquidation of the collateral. In certain circumstances, other information such as comparable sales data is deemed to be a more reliable indicator of fair value of the underlying collateral than the most recent appraisal. In these instances, such information is used in determining the impairment recorded for the loan. As the repayment of commercial and industrial loans is generally dependent upon the cash flow of the borrower or guarantor support, the impairment evaluation generally focuses on the discounted future cash flows of the borrower or guarantor support, as well as the projected liquidation of any pledged collateral. The Impairment Committee reviews the results of each evaluation and approves the final impairment amounts, which are then included in the analysis of the adequacy of the allowance for credit losses in accordance with FASB ASC 310. Loans identified for impairment are placed in non-accrual status.

          The Company’s policy is to obtain an appraisal at the time of loan origination for real estate collateral securing a loan of $250,000 or more, consistent with regulatory guidelines. The Company’s policy is to obtain an updated appraisal when certain events occur, such as the refinancing of the debt, the renewal of the debt or events that indicate potential impairment. A new appraisal is generally ordered for loans greater than $200,000 that have characteristics of potential impairment, such as delinquency or other loan-specific factors identified by management, when a current appraisal (dated within the prior 12 months) is not available or when a current appraisal uses assumptions that are not consistent with the expected disposition of the loan collateral. In order to measure impairment properly at the time that a loan is deemed to be impaired, a staff appraiser may estimate the collateral fair value based upon earlier appraisals, sales contracts, approved foreclosure bids, comparable sales, officer

estimates or current market conditions until a new appraisal is received. This estimate can be used to determine the extent of the impairment on the loan. After a loan is deemed to be impaired, it is management’s policy to obtain an updated appraisal on at least an annual basis. Management performs a review of the pertinent facts and circumstances of each impaired loan on a monthly basis. As of each review date, management considers whether additional impairment should be recorded based on recent activity related to the loan-specific collateral as well as other relevant comparable assets. Any adjustment to reflect further impairments, either as a result of management’s periodic review or as a result of an updated appraisal, are made through recording additional loan loss provisions or charge-offs.

          At December 31, 2010, impaired loans totaled $273.4 million, which was net of cumulative charge-offs of $72.0 million. Additionally, the Company had specific reserves of $40.7 million included in the allowance for credit losses. Impaired loans at December 31, 2010 were primarily from the Company’s consumer real estate or residential construction, acquisition and development real estate portfolios. The loans were evaluated for impairment based on the fair value of the underlying collateral securing the loan. As part of the impairment review process, appraisals are used to determine the property values. The appraised values that are used are generally based on the disposition value of the property, which assumes Bank ownership of the property “as-is” and a 180-day marketing period. If a current appraisal or one with an inspection date within the past 12 months using the necessary assumptions is not available, a new third-party appraisal is ordered. In cases where an impairment exists and a current appraisal is not available at the time of review, a staff appraiser may determine an estimated value based upon earlier appraisals, the sales contract, approved foreclosure bids, comparable sales, comparable appraisals, officer estimates or current market conditions until a new appraisal is received. After a new appraisal is received, the value used in the review will be updated and any adjustments to reflect further impairments are made. Appraisals are obtained from state-certified appraisers based on certain assumptions which may include foreclosure status, bank ownership, other real estate owned marketing period of 180 days, costs to sell, construction or development status and the highest and best use of the property. A staff appraiser may make adjustments to appraisals based on sales contracts, comparable sales and other pertinent information if an appraisal does not incorporate the effect of these assumptions.

          When a guarantor is relied upon as a source of repayment, it is the Company’s policy to analyze the strength of the guaranty. This analysis varies based on circumstances, but may include a review of the guarantor’s personal and business financial statements and credit history, a review of the guarantor’s tax returns and the preparation of a cash flow analysis of the guarantor. Management will continue to update its analysis on individual guarantors as circumstances change. Because of the continued weakness in the economy, subsequent analyses may result in the identification of the inability of some guarantors to perform under the agreed upon terms.

          Any loan or portion thereof which is classified as “loss” by regulatory examiners or which is determined by management to be uncollectible, because of factors such as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged off.

          An analysis of the allowance for credit losses for the five years ended December 31, 2010 is provided in the following table:

		2010				2009				2008				2007				2006
						(Dollars in thousands)
Balance, beginning of period		$	176,043			$	132,793			$	115,197			$	98,834			$	101,500
Loans and leases charged off:
Commercial and industrial			(11,879	)			(9,534	)			(7,124	)			(2,656	)			(2,008	)
Real estate
Consumer mortgages			(25,639	)			(13,917	)			(8,161	)			(4,801	)			(3,370	)
Home equity			(5,215	)			(5,372	)			(1,307	)			(537	)			(361	)
Agricultural			(1,201	)			(848	)			(381	)			(45	)			(217	)
Commercial and industrial-owner occupied			(9,200	)			(4,033	)			(1,970	)			(1,126	)			(3,099	)
Construction, acquisition and development			(113,237	)			(32,638	)			(15,332	)			(818	)			—
Commercial			(14,084	)			(3,584	)			(814	)			(465	)			(1,743	)
Credit cards			(4,559	)			(4,770	)			(3,636	)			(2,979	)			(2,189	)
All other			(6,008	)			(3,517	)			(3,342	)			(3,414	)			(3,116	)
Total loans and leases charged off			(191,022	)			(78,213	)			(42,067	)			(16,841	)			(16,103	)
Recoveries:
Commercial and industrial			1,330				761				1,134				997				1,801
Real estate
Consumer mortgages			1,448				824				532				836				496
Home equity			179				109				30				117				3
Agricultural			12				2				—				29				—
Commercial and industrial-owner occupied			399				297				75				261				89
Construction, acquisition and development			1,706				128				263				27				4
Commercial			845				189				23				126				66
Credit cards			829				617				319				282				347
All other			1,128				1,212				1,537				1,680				2,054
Total recoveries			7,876				4,139				3,913				4,355				4,860
Net charge-offs			(183,146	)			(74,074	)			(38,154	)			(12,486	)			(11,243	)
Provision charged to operating expense			204,016				117,324				56,176				22,696				8,577
Other, net			—				—				(426	)			6,153				—
Balance, end of period		$	196,913			$	176,043			$	132,793			$	115,197			$	98,834
Loans and leases, net of unearned income — average		$	9,621,529			$	9,734,580			$	9,429,963			$	8,784,940			$	7,579,935
Loans and leases, net of unearned income — period end		$	9,333,107			$	9,775,136			$	9,691,277			$	9,179,684			$	7,871,471
RATIOS
Net charge-offs to average loans and leases			1.90	%			0.76	%			0.40	%			0.14	%			0.15	%
Provision for credit losses to average loans and leases, net of unearned income			2.12	%			1.21	%			0.60	%			0.26	%			0.11	%
Allowance for credit losses to loans and leases, net of unearned income			2.11	%			1.80	%			1.37	%			1.25	%			1.26	%

          The increase in the provision for credit losses in 2010 compared to 2009, as well as the increase in 2009 compared to 2008, was primarily a result of the increased credit risk experienced by the Company, as the length and severity of the recession, as well as the lackluster prevailing economic environment, affected the liquidity of the Company’s borrowers. Increases in net charge-offs during 2010 along with a significant increase in NPLs resulted in a provision for credit losses of $204.0 million in 2010 compared to a provision of $117.3 million in 2009. Net charge-offs as a percentage of average loans and leases increased in 2010 when compared to 2009 and in 2009

when compared to 2008, primarily as a result of the Company experiencing increased losses within the real estate construction, acquisition and development segment of the Company’s loan portfolio and in its consumer mortgage portfolio. These portfolios experienced increased losses primarily because of the weakened financial condition of the corresponding borrowers and guarantors. These borrowers’ weakened state hindered their ability to service their loans with the Company, which caused a number of loans to become collateral dependent. Once it is determined a loan’s repayment is dependent upon the underlying collateral, the loan is charged down to net realizable value or a specific reserve is allocated to the loan. This process resulted in an increased level of charge-offs in 2010 and 2009, with a more pronounced increase in 2010. The increased level of charge-offs caused the ratio of the allowance for credit losses to charge-offs to decline below historic levels. As of December 31, 2010, 79% of nonaccrual loans had been charged down to net realizable value or had specific reserves to reflect recent appraised values as of December 31, 2010. This resulted in impaired loans having an aggregate net book value of 67% of their contractual principal balance at December 31, 2010. As of December 31, 2009, 89% of nonaccrual loans had been charged down to net realizable value or had specific reserves to reflect recent appraised values as of December 31, 2009. This result in impaired loans having an aggregate net book value of 65% of their contractual principal balance at December 31, 2009.

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

		2010								2009								2008
						% of Loans								% of Loans								% of Loans
		Allowance				in Each				Allowance				in Each				Allowance				in Each
		for				Category				for				Category				for				Category
		Credit				to Total				Credit				to Total				Credit				to Total
		Loss				Loans				Loss				Loans				Loss				Loans
		(Dollars in thousands)
Commercial & industrial		$	22,479				16.0	%		$	21,154				15.1	%		$	19,150				14.7	%
Real estate
Consumer mortgages			37,347				21.1				37,048				20.5				31,158				21.5
Home equity			7,305				5.8				7,218				5.6				5,689				5.3
Agricultural			4,997				2.7				4,192				2.7				3,167				2.4
Commercial and industrial-owner occupied			20,403				14.2				22,989				14.7				17,982				15.0
Construction, acquisition and development			57,241				12.3				46,193				14.9				29,771				17.4
Commercial			33,439				19.4				26,694				18.4				17,899				16.1
Credit cards			4,126				1.1				3,481				1.1				1,572				1.0
All other			9,576				7.4				7,074				7.0				6,405				6.6
Total		$	196,913				100.0	%		$	176,043				100.0	%		$	132,793				100.0	%